Interest Rate 2010

 

 

The United States and most of the developed countries are unlikely to witness a significant change in their decade low interest rates any time soon. Interest rate 2010 is expected to largely remain unchanged from the near zero level, despite economic recovery gaining ground.[br]

 

Predictions for Interest Rate 2010

The outlook for interest rate 2010 remains mixed, with no consensus on how much of an increase is likely after the sharp cuts introduced during the 2008 global slowdown. Although the aggressive actions taken by the central governments of various countries have lead to stabilization of the banking systems and the overall economy, unemployment remains quite high. The high level of unemployment is expected to continue, restricting the financial authorities from raising interest rates to forestall inflation.

 

Several factors are likely to restrict the central banks from raising the interest rates in the foreseeable future. Here are some of them:[br]

Ø      The massive amount of spare capacity will restrict inflation prospects in the near future.

Ø      Lending still remains restricted and could hinder economic growth.

Ø      Huge budget deficits faced by individual governments will result in lower spending and higher taxes, which are likely to depress economic growth.

Ø      High unemployment levels would depress wages and spending.

Ø      Weak output levels.

 

Despite these negative factors, several positive signs, such as improvement in the housing segment in the form of rising house prices, have emerged. Additional signs of an economic recovery taking hold are also expected to boost the case for hiking the interest rates. The interest rate changes in 2010 are likely to be driven by the pace of economic recovery taking place across the globe.

 

Australia became the first developed country following the 2008 global credit crisis to hike its base interest rate in October 2009 by 0.25%. However, several other nations (such as the UK and Sweden) have decided to maintain their low interest rates, indicating that hikes are unlikely in the near future. The interest rate is likely to remain low in most countries in 2010.